Bitcoin-based gambling to expand in 2013

Peer-to-peer currency could bring online poker back to the United States.

Last year, we wrote about Satoshi Dice, a Bitcoin-based online "slot machine." This month, at least one company hopes to introduce Bitcoin-based poker. The move could help to re-open online poker to American gamblers in the face of vigorous efforts by the US government to shut down online poker sites that serve Americans.

Online gambling has been illegal since 2006. But of course that hasn't stopped American Internet users from looking for ways to play on overseas websites. In recent years, the government has used a variety of tactics to crack down on overseas sites that cater to American customers.

A key vulnerability of offshore gambling sites is the need to get cash to and from American gamers. Until recently, the only practical way to do this was via traditional financial networks that are subject to regulation by the US government. Indeed, a ban on the use of credit cards for betting was a key provision of the 2006 online gambling ban.

But Bitcoin's peer-to-peer design and global reach effectively puts it beyond the reach of the feds. And its pseudonymous design gives online gambling sites plausible deniability: they might suspect that some of their users are based in the United States, but there's no practical way to verify the nationality of any specific Bitcoin depositor.

Businessweek reports that a Calgary company called Infiniti Poker is planning to accept Bitcoins for deposit when it opens for business later this month. Founder Michael Hajduk says his primary motivation is to speed up the payment process—Bitcoin payments can clear in a matter of hours rather than days or weeks—but he acknowledges another consequence is that it will also make it easier for American gamblers to play on his site.

I'm just a ignorant European, so I will ask. What are the reasons for the ban, Morality?

It's a big country. The protestants oppose it for moral reasons, the Nevada and New Jersey casinos oppose it for competitive reasons, the 43 states that run their own lotteries oppose it for competitive reasons, and so on. The net result is that enough people have moral or financial reasons to ban internet gambling.

Some states have talked about the idea of putting in regulations for online poker sites to host servers and legalize it. None have yet to take that step. If you regulate it, keep them audited and get tax revenue i fail to see the problem vs say expanding poll tabs.

"And its pseudonymous design gives online gambling sites plausible deniability: they might suspect that some of their users are based in the United States, but there's no practical way to verify the nationality of any specific Bitcoin depositor."

Why would foreign companies care if Americans use a service that is illegal in USA?

But anyways, I'd say that someones IP is a pretty good indicator of where people are from, should they care.

"And its pseudonymous design gives online gambling sites plausible deniability: they might suspect that some of their users are based in the United States, but there's no practical way to verify the nationality of any specific Bitcoin depositor."

Why would foreign companies care if Americans use a service that is illegal in USA?

But anyways, I'd say that someones IP is a pretty good indicator of where people are from, should they care.

"And its pseudonymous design gives online gambling sites plausible deniability: they might suspect that some of their users are based in the United States, but there's no practical way to verify the nationality of any specific Bitcoin depositor."

Why would foreign companies care if Americans use a service that is illegal in USA?

But anyways, I'd say that someones IP is a pretty good indicator of where people are from, should they care.

If a company is owned by foreigners and don't have a .com domain, why would they care? Obviously they need to be able to accept money, and transfer money, to/from their customers, which is were BitCoin comes in I understand.

But the article also talks about deniability and anonymity, that part doesn't make sense to me, unless you're an American company, and/or use a .com domain.

If a company is owned by foreigners and don't have a .com domain, why would they care? Obviously they need to be able to accept money, and transfer money, to/from their customers, which is were BitCoin comes in I understand.

But the article also talks about deniability and anonymity, that part doesn't make sense to me, unless you're an American company, and/or use a .com domain.

If you're an American using their site, they probably don't care. But because it's so difficult for Americans to get money in and out of your casino, you probably don't have many Americans there. US law has created an untapped market-- Americans who want to gamble, but don't want to go through the extra steps to circumvent the US's laws against online gambling.

I'm just a ignorant European, so I will ask. What are the reasons for the ban, morality, protectionism?

Fraud prevention and tax collection. Gambling is heavily regulated and taxed in the States and online gambling sites generally don't comply.

I understand the issue with slot machines and such. I don't trust them in real life or online. However, I don't understand the issue with a Sportsbook. That shouldn't be a problem with fraud unless the sportsbook is simply stealing your money. At which point the crime is clear cut.

But the article also talks about deniability and anonymity, that part doesn't make sense to me, unless you're an American company, and/or use a .com domain.

Read up on the early reports from the MegaUpload debacle.

The US government went after a company based in Hong Kong under the premise that they were knowingly and actively doing business with American citizens (they even contracted with an American company for hosting to speed up downloads).

If a company is owned by foreigners and don't have a .com domain, why would they care?

Ask Kim Dotcom.

Heh, yeah.

Though countries only extradite people if what the accused of is illegal in that country as well. I don't think New Zealand would have done the same for some dude running a poker site (assuming such is actually legal in New Zealand).

Though countries only extradite people if what the accused of is illegal in that country as well. I don't think New Zealand would have done the same for some dude running a poker site (assuming such is actually legal in New Zealand).

That's because gambling is a moral issue whereas copyright infringement is an economic issue. No matter what you're personal beliefs are you lose potential profit when a stranger hundreds of miles away distributes your work without permission. The impact (on you) of that same stranger deciding to gamble online are far murkier, and subject to widespread debate.

The creator of the Bitcoin may have limited it to the current 21 million, but he inadvertently created an infinite comedy generator in the form of the current Bitcoin community.

Being up front in that I do not see the point of gambling, but I don't see why it should be illegal, just regulate it so people aren't doing so from people who aren't afraid to use sledgehammers on legs. Having said that, if these guys don't think the Federal government is going to be taking a VERY close look at them (specifically any US-based exchange where you can convert Bitcoins to/from other currencies) if this does gain traction and will be crushing them like a bug in the process, I have a bridge to sell them.

Having said that, if these guys don't think the Federal government is going to be taking a VERY close look at them (specifically any US-based exchange where you can convert Bitcoins to/from other currencies) if this does gain traction and will be crushing them like a bug in the process, I have a bridge to sell them.

I'm just a ignorant European, so I will ask. What are the reasons for the ban, Morality?

It's a big country. The protestants oppose it for moral reasons, the Nevada and New Jersey casinos oppose it for competitive reasons, the 43 states that run their own lotteries oppose it for competitive reasons, and so on. The net result is that enough people have moral or financial reasons to ban internet gambling.

I think you're confusing Protestants and Puritans. I am Protestant (specifically Anglican [Church of England]), i.e. a Christian not of the Roman or Eastern Church, but I don't oppose gambling. I'm all for it if it increases revenue and that revenue is used for good purposes like schools, roads, et cetera.

I think this site is going to have some serious trust issues from its user base after what happened with Full Tilt and Ultimate Bet.

Why? Assuming they don't use servers based in the US, use a domain that can't be seized by the FBI, and don't exchange money to/from US currency, I don't see how the US government can even do anything about them.

The only potential issues would have to come from the other side of the border. Admittedly, I have no idea what Canada's laws are regarding gambling or online poker so I can't speak to the issue of whether they would be at risk from their own government.

I've been saying for years the US could regain it's slipping international student STEM rankings if we abolished the dark age gambling laws and began teaching kids card counting and bookmaking math.

I'm sure many here are familiar with John Nash and A Beautiful Mind. Unlike calculus and other boring highschool bullcrap, the applications of discrete math and game theory are obvious and I'd even go as far as saying they're fun to learn.

"And its pseudonymous design gives online gambling sites plausible deniability: they might suspect that some of their users are based in the United States, but there's no practical way to verify the nationality of any specific Bitcoin depositor."

Why would foreign companies care if Americans use a service that is illegal in USA?

Because almost all countries have reciprocal agreements with the US not to sell illegal things in the other's country, and extradition treaties with the US. Otherwise the US could smuggle assault rifles to, say, the UK to sell them, and the UK couldn't do anything about it.

As for the rationale for the ban, four reasons:

1) Regulatory reasons. It is difficult to regulate online businesses. However, it is far more difficult to regulate foreign online businesses doing business in the US, so this is a kind of questionable argument. There are pretty strict regulations on casinos and gambling in the US, and it is very difficult to regulate a thousand shady poker sites.

2) Moral reasons. "Gambling is teh evils!" To be fair, I actually agree that gambling is bad.

3) Ethical reasons. If you make it easy to gamble from your home, it is very easy for people who are addicted to gambling to spend all their money there, invisibly. THis is a very real problem.

4) Tax reasons. Much like regulation above, they have to ensure that taxes are paid, and this is again difficult. Again, however, this is an argument against international gambling; in-country gambling is far more easily regulated.

As you can see, in the end, two of them (tax and regulation) actually suggest you should do it in the US. Two of them (ethical and moral) suggest it is wrong.

Personally, I'm very dubious of all gambling, and feel that to a greater or lesser extent it is wrong. However, I also acknowledge the reality that people WILL gamble, legal or not, and thus it makes more sense to regulate it.

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Though countries only extradite people if what the accused of is illegal in that country as well. I don't think New Zealand would have done the same for some dude running a poker site (assuming such is actually legal in New Zealand).

Running a poker site is not illegal. The problem with dealing with Americans is not that online gambling here is illegal per se, but rather that no American financial institution can legally transfer you funds. If you are misrepresenting your company to American financial institutions so you can take money from them, you're committing fraud, which IS illegal in New Zealand and could get you extradited. There are also tax issues (if you do business in the US, you are susceptible to US taxes, even if you are in another country).

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I've been saying for years the US could regain it's slipping international student STEM rankings if we abolished the dark age gambling laws and began teaching kids card counting and bookmaking math.

I can't imagine any sane online casino would play blackjack, unless they made it so that card counting was impossible. And it is well worth noting that an online casino can trivially shuffle the deck after every deal, at which point card counting becomes impossible (if you play blackjack blind, i.e. without counting cards, the house still has an advantage).

Being up front in that I do not see the point of gambling, but I don't see why it should be illegal, just regulate it so people aren't doing so from people who aren't afraid to use sledgehammers on legs..

I have to exception to this statement. The people with sledgehammers exist in the first place only because of regulation. US government, at the Federal and sometimes state level, bans gambling, and that turns the industry over to the black market. If the USA simply repealed their gambling prohibitions, no gambler would ever need worry about violence. Regulating gambling would not be done to protect gamblers from mobsters. It would be done to line the pockets of the American government, which of course is the greatest organized criminal of them all.

Bitcoin gambling is legal because Bitcoins aren't money, they have no value in the eyes of the law.

I'm just waiting for the Bitcoin bubble to pop, the idea of a peer-to-peer cryptocurrency isn't unique to Bitcoin. Bitcoin's policy of rewarding early adopters to the detriment of anyone else will eventually be its undoing. If you have any reasonable number I suggest selling today.

I'm just a ignorant European, so I will ask. What are the reasons for the ban, Morality?

It's a big country. The protestants oppose it for moral reasons, the Nevada and New Jersey casinos oppose it for competitive reasons, the 43 states that run their own lotteries oppose it for competitive reasons, and so on. The net result is that enough people have moral or financial reasons to ban internet gambling.

I think you're confusing Protestants and Puritans. I am Protestant (specifically Anglican [Church of England]), i.e. a Christian not of the Roman or Eastern Church, but I don't oppose gambling. I'm all for it if it increases revenue and that revenue is used for good purposes like schools, roads, et cetera.

It is possible that he did not capitalize it for a reason, as "protestant" means something different when it is not capitalized.

I'm just a ignorant European, so I will ask. What are the reasons for the ban, Morality?

It's a big country. The protestants oppose it for moral reasons, the Nevada and New Jersey casinos oppose it for competitive reasons, the 43 states that run their own lotteries oppose it for competitive reasons, and so on. The net result is that enough people have moral or financial reasons to ban internet gambling.

Why does BitCoin articles always attract such trolls, what do you want? What's your problem?

I know this wasn't directed at me but my personal issue with Bitcoins is the community, it is toxic and filled with scammers.

That's simply not true. If you only know about bitcoin from sensational headlines then I can see why you'd believe that, but I've been involved with bitcoin for over two years and, just like in any community, only a small fraction are dishonest and untrustworthy. If something sounds too good to be true (e.g. a 7% weekly ROI), then it should be avoided, regardless of the currency.

This is a common misconception, no doubt aided by politicians repeatedly claiming this lie as fact. Online gambling is not illegal at a federal level in the USA. The UIGEA law that was tacked on to an unrelated port security bill makes it illegal for banks to transfer money for the purpose of "illegal internet gambling" but no-one has ever defined that legally or even knows what that is. There is a law called the Wire Act which was enacted decades ago in an attempt to stop interstate sports betting over the phone, but last year it was clarified by the US DoJ that it does not apply to internet based gambling at all. Some states have explicit laws making online gambling from within their borders illegal but most do not.

Those charged with offences related to online gambling in the USA have usually been charged with things like financial fraud, not conducting an illegal gambling site.

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But of course that hasn't stopped American Internet users from looking for ways to play on overseas websites. In recent years, the government has used a variety of tactics to crack down on overseas sites that cater to American customers.

The problem the gambling sites have is that they have customers that want to play but with companies like Visa and Mastercard playing it safe and blocking gambling transactions, they have to process deposits and withdrawals using miscoded transactions which just opens them up for trouble later. The intermediary "payment processor" companies have them over a barrel and commonly have a 45 or 60 day hold on deposits made through them (i.e. customer deposits, then withdraws a day later and the casino pays them, but doesn't receive the original deposit for 2 months). These payment processors are continually popping up and disappearing, either having funds seized or just grabbing the cash and running (after all the gambling site can't complain to the authorities).

As for Bitcoin casinos, there are one or two that have been around for a few years now for those who know where to look. So this is nothing new. While it might solve the transactional problem, I doubt many potential customers would be keen on using it due to the volatility of the currency. Looking at the current 30 day range it has fluctuated between 12.75 and 13.9 USD. I can't imagine people would be too happy with depositing say $100, winning $50 and ending up withdrawing only to find they end up with $135 before any other fees incurred in swapping it back to dollars or whatever. Its a whole other level of gambling (then again maybe it is the right target market).

The other issue is that most of the online casinos and poker rooms are paranoid about money laundering and dodgy transactions, especially the ones in heavily regulated jurisdictions (though to be fair none of those accept Americans). If a customer deposits using a credit card, they will only pay withdrawals back to the same card if allowed, or using a cheque or bank account in the same name, and only after sighting a copy of a valid ID document. I'd say the established big name casinos would not be looking at Bitocin due to the anonymity as it makes it a very simple way to launder money in and out of an unknown third party's accounts.

Timothy B. Lee / Timothy covers tech policy for Ars, with a particular focus on patent and copyright law, privacy, free speech, and open government. His writing has appeared in Slate, Reason, Wired, and the New York Times.